Beyond licensing, private mortgage agreements must comply with both federal and provincial laws governing contracts, interest rates, and consumer protections.
- Criminal Code of Canada (s. 347): Prohibits charging a criminal rate of interest, defined as an annual percentage rate (APR) exceeding 35%.
- Interest Act (federal): Requires disclosure of an annual interest rate (if interest is expressed at any rate other than annual) and prohibits penalties or additional interest on arrears beyond the agreed rate upon default.
- Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA): Private mortgage lenders may be subject to compliance duties and reporting to FINTRAC. This is explained later in the course.
- Contract Law Principles (provincial): Mortgages are contracts and must satisfy the requirements of offer/acceptance, consideration, capacity, and legality.
- Consumer Protection Legislation (provincial): Applies mainly to individual borrowers (or guarantors) in residential or personal contexts. Examples include Ontario’s Consumer Protection Act and BC’s Business Practices and Consumer Protection Act, which impose disclosure rules and protections against unconscionable terms. However, these statutes typically do not apply to business/commercial mortgages.
- Mortgage Licensing Statutes (provincial): Provincial licensing statutes such as Ontario’s Mortgage Brokerages, Lenders and Administrators Act and British Columbia’s Mortgage Brokers Act primarily regulate brokerages, agents and administrators. While an individual private lender advancing their own funds on an occasional basis is generally exempt, a lender who makes mortgage loans as a business may, in some provinces such as BC, be required to register as a mortgage broker.